Illinois pensions: Credit rating sinks after deadlock

As credit rating sinks, Quinn takes hit from potential rivals

Rep. Jack Franks, D-Marengo, lashes out over the lack of pension action last week in the Illinois House. Aides to Gov. Pat Quinn say he’s unlikely to bring legislators back for a special session unless there’s an agreement. (E. Jason Wambsgans)

The first repercussion of state lawmakers' failure to pass pension reform was felt Monday when a major ratings agency downgraded Illinois' credit rating, saying the government worker retirement system's debt is "unsustainable."

The political fallout was quick for Democratic Gov. Pat Quinn, who for two years has declared pension reform his No. 1 priority with little to show for his efforts. Potential 2014 governor candidates from both parties blasted Quinn for a lack of leadership, urging him to call a special session to address a pension shortfall that's approaching $100 billion.

While Quinn aides said all options are on the table, they indicated the governor is unlikely to bring legislators back to the Capitol unless there's an agreement. They point to last August, when Quinn called the House and Senate into special session on pensions only to see legislators clock in and clock out without voting on anything.

Instead, the governor's focus is on continuing talks with House Speaker Michael Madigan and Senate President John Cullerton, Chicago Democrats who remain deeply divided on the best approach. Quinn has convened a meeting for Tuesday, though it's unclear how much will get done since Madigan is out of the state.

If somehow an agreement on pension reform could be reached over the summer, lawmakers could be asked to return to vote on a measure that wouldn't take effect for another year. That move means a special three-fifths majority would not be needed for approval, and there would be time for the inevitable court challenge before the law would be put in place.

"Obviously, we are just going to have to keep talking and see if there is a way to meld the (differing) approaches," said Rep. Elaine Nekritz, a Democrat from Northbrook who has served as a leading pension negotiator. "I don't know if there is."

Quinn is desperate for a resolution, not only to help dig the state out of the red but also to boost his own political future in the face of what will likely be a driving issue in the 2014 campaign. The governor has been unable to win reforms even with Democrats holding veto-proof majorities in both the House and Senate, leading some at the Capitol to wonder whether the inaction is chaos by design as Illinois Attorney General Lisa Madigan weighs a possible primary election challenge to Quinn.

Indeed, the lack of movement on pensions may serve as an impetus for one key Democrat to challenge Quinn in next year's primary. William Daley, the son of one former mayor and brother of another, said the state's failure to fix the pensions has him "stunned."

"I'm more seriously considering this by virtue of the debacle that seemed to happen with this legislative session," said Daley, who said he will let his intentions be known about running for governor within a week.

Daley said a dynamic leader would have brought together the two differing plans put forth by fellow Democrats Madigan and Cullerton rather than leave Springfield with a stalemate.

"They both had different ideas on this bill. So who's the one who's supposed to forge a compromise? The governor," Daley said.

For his part, Quinn scoffs at the suggestion that he's not doing enough to push pension changes, noting he convened a working group to come up with ideas, set deadline after deadline and frequently meets with lawmakers on both sides of the aisle on the issue.

"Nobody has been fighting harder for pension reform than Gov. Quinn," spokeswoman Brooke Anderson said. "We do not live in a dictatorship. … Lawmakers know what they need to do, and send the governor a comprehensive pension reform bill that he can sign."

Monday's credit downgrade may help keep the pressure up, though a series of prior downgrades have done nothing to spur a deal. The action by Fitch Ratings drops Illinois' credit rating from A to A-, meaning it could cost more to borrow money to pay for things like an ongoing capital construction program. On the flip side, interest rates are at an all-time low and the state has been able to secure relatively good interest rates despite the earlier downgrades. Still, the worst-in-the-nation credit ratings already bestowed on the state by Standard & Poor's and Moody's Investors Service are far from desirable.

Republican Sen. Bill Brady of Bloomington questioned the ability of Quinn and Democratic leaders to strike a deal on their own, saying two years of confabs have yet to produce a solution. He wants Quinn to call a special session, saying the initial costs of paying for lawmakers' per diems will be far less than the continued drain on the pension system.